I had the pleasure of speaking on the VC panel at START SF last week with Aileen Lee (Kleiner Perkins Caufield & Byers / Cowboy Ventures), Mike Maples (Floodgate), and Jeff Clavier (SoftTech VC).
There really wasn’t any controversy amongst the panelists. While not necessarily a bad thing, it was 9am and I hadn’t had enough coffee yet. In an effort to create a lively pick-me-up of a conversation, I pointed out that I completely agree with the VC cliché, “There’s too much money chasing too few good deals.” People think that’s surprising coming from me because FundersClub brings more capital to the table. But this is not the really interesting part.
Let’s ignore the fact that that statement presumes that “chasing deals” is a preferred mode of VCs, as if they’re supposed to be flocking around hot “deals” as opposed to partnering with the founders of top companies to help build value (thanks Sam Altman for commenting on this recently). The main point the truism conveys is that everyone wants to fund the obviously great startups. Okay. Great. Not surprising.
What was actually meant to invoke more controversy is that I quickly also pointed out that simultaneously, the converse is true: there is not enough money chasing not enough deals (BTW I was tempted to replace “chasing” with “pursuing” and “deals” with “companies” there). In other words, while there’s an excess of funding in some markets, geographies, sectors, trends, etc, there’s an extreme shortage in others, and the inefficiencies of much of the VC and angel financing ecosystem means a long time may elapse between real opportunities existing and real capital being available to fuel growth of these opportunities. Likewise, lags exist so that some startups are funded to the point of becoming the living dead, zombie companies that would not naturally exist otherwise seeking market demand long past or never present. Solving these inefficiencies is really really hard. But if someone addresses them, a lot more investors and founders will be smiling. It’s heartening to see VC being disrupted right now, both by incumbents and newcomers.
In honor of Nikola Tesla’s birthday (July 10), enjoy this (mostly) tongue-in-cheek stab at the industry [Youtube]. If you’ve ever closed VC funding, you’ll appreciate this. Thanks to Dave Graham of Greenstart for sharing (and I hope the Nikola Tesla statue emitting WiFi actually gets built).